During the last decades of the 20th century, many psychiatric hospitals changed the living environments of their clients with long-term psychiatric disabilities. We investigated the effect of this environmental psychiatric rehabilitation and normalization process on the activity and participation level of such clients residing in one Dutch psychiatric hospital. The seven years of panel research demonstrated that more normal living environments have a positive effect on clients' activity and participation level. This is controlled for the fact that younger clients, and clients with a relative high activity and participation level were selected for these normal living environments.